An Empirical Analysis On Fiscal Competition And Agglomeration Between Provincial Governments

Mobility of factors encourages local governments to provide financial incentives, hoping to attract more resources to speed up the region's economic development. Since the 80s of the 20th century, along with the deepening of China's economic reform and financial reform, factor mobility across regions increased significantly, which brings profound impacts on China's provincial competition.This paper presents a thorough study of the Fiscal competition and Agglomeration between Provincial Governments. Based on the level of tax burden and public services, Fiscal competition of Provincial Governments can divided into four types.This paper further provides a empirical analysis on characteristics of different types of fiscal competition and industrial agglomeration, and also relationships between them. It is concluded that mobility factor is a crucial link which connects industrial concentration and fiscal competition. Industrial concentration and mobility of factors are the underlying reasons of the formation of different types of fiscal competition.And accordingly this paper analyzes the fiscal competitions of different types and put forward policy recommendations. At the same time,this paper puts forward corresponding countermeasures in terms of strengthening the management of extra-budgetary fund, improving transfer payment system, and policy coordination and cooperation.